2006 (12) TMI 471 - HC - VAT and Sales Tax

Summary

Issues Involved:
The judgment addresses the following Issues:
1. Whether the transfer of the entire mill by the opponent company to another entity constitutes a sale of goods u/s 2(12) of the Act?
2. Whether the transfer of the concern, including debts and liabilities, can be considered a sale of goods during the course of business?
3. Whether the amount of sale should be excluded from the taxable turnover of the opponent company?
4. Whether the levy of sales tax and penalty imposed under section 45(6) of the Act is justified?

Issue 1:
The opponent company transferred the entire mill to another entity, and the question was whether this transfer constituted a sale of goods u/s 2(12) of the Act. The Tribunal held that the transfer did not amount to a sale of goods during the course of business, as it occurred after the closure of the business. The Tribunal's finding was based on the fact that the transfer was not as a going concern but after the closure of the concern. The court re-framed the question to consider whether the transfer after the closure of the business was taxable under the Act.

Issue 2:
The second issue revolved around whether the transfer, which included debts, liabilities, and other movables, could be treated as a sale of goods during the course of business. The Tribunal concluded that the sale of the entire business after discontinuance did not meet the definition of a sale of goods u/s 2(12) of the Act. The court referred to a previous case to support the position that a sale made after the closure of business is not taxable under the Act.

Issue 3:
Regarding the exclusion of the sale amount from the taxable turnover of the opponent company, the Tribunal's decision was based on the finding that the sale proceeds were not liable to tax due to the nature of the transfer after the closure of the business. The court upheld this decision, emphasizing that there could be no turnover of sales when the business is closed down and the entire business is transferred.

Issue 4:
The final issue pertained to the levy of sales tax and penalty under section 45(6) of the Act. The Sales Tax Officer had imposed tax and penalty on the opponent company, which was challenged in subsequent appeals. The Tribunal ultimately ruled in favor of the opponent company, stating that the sale proceeds were not taxable. The court upheld this decision, ruling in favor of the opponent company and against the Revenue.

In conclusion, the court found in favor of the opponent company on all issues, holding that the transfer of the entire mill after the closure of the business did not constitute a sale of goods during the course of business, and therefore, the sale proceeds were not liable to attract any tax under the Gujarat Sales Tax Act, 1969.